SMSF - is this really true?

[yonnie]

if its true, wowwwwwwwwwwwwww

hi people,

I`m 57, married to a beautiful woman and just starting to set up a SMSF.
We are share traders and play around with $ 450,000 with a short/medium term strategy. Our net profit will be around $ 75,000 each for 2006/07 and I had wages of $ 2,400 and her wages about $ 10,000 this year.

Now what do I hear?????

Make cash deductable contributions before 1 July 2007 so much so that our personal maximum tax rate is 15% and pay 15% on the deductions.
Then transfer the shares in specie before 1 July 2007

From 1 July we retire, withdraw from the SMSF a pension,
keep trading in our SMSF and pay noooooooooo tax at all.

Is that a wet dream or what???

 

[Julia]

if its true, wowwwwwwwwwwwwww

hi people,

I`m 57, married to a beautiful woman and just starting to set up a SMSF.
We are share traders and play around with $ 450,000 with a short/medium term strategy. Our net profit will be around $ 75,000 each for 2006/07 and I had wages of $ 2,400 and her wages about $ 10,000 this year.

Now what do I hear?????

Make cash deductable contributions before 1 July 2007 so much so that our personal maximum tax rate is 15% and pay 15% on the deductions.
Then transfer the shares in specie before 1 July 2007

From 1 July we retire, withdraw from the SMSF a pension,
keep trading in our SMSF and pay noooooooooo tax at all.

Is that a wet dream or what???

Yep, yonnie. Pretty good, isn't it.
The other option is to keep your SMSF in the accumulation phase and just pull out lump sums (tax free) as you need it, thus avoiding the need to set up an allocated pension.

I'm just wondering about your being 57. Are you sure the above applies if you are under age pension age? I don't know about this and need to know for myself before too long.

 

[lesm]

Yep, yonnie. Pretty good, isn't it.

I'm just wondering about your being 57. Are you sure the above applies if you are under age pension age? I don't know about this and need to know for myself before too long.

yonnie,

As Julia suggested, think you should check this out and have it verified via an authoritative source.

The following is an extract from the FIDO site (http://www.fido.gov.au/fido/fido.ns...hanges+to+super+from+1+July+2007?openDocument) maintained by ASIC:

Proposed changes to super from 1 July 2007

Please note that Parliament has now passed laws that will limit how much you can contribute to super after 1 July 2007. If you're planning large contributions, you may need to read more about the incoming rules.

Here we give a basic summary of the changes, so you can see if they're likely to affect your retirement or your contribution plans. We also explain how they will affect some of our calculators and our super and retirement information.

More help
The Treasury website simplersuper.treasury.gov.au has much more information. You may also need personal advice from a licensed financial adviser.

Retirement and your super

Superannuation benefits paid from a taxed fund, either as a lump sum or as an income stream such as a pension, will be tax free for people aged 60 and over.

Benefits paid from an untaxed scheme (mainly affecting public servants) will still be taxed, although at a lower rate than they are now for people aged 60 and over.

If, under the law, you are presently allowed to retire and access your super before age 60, your right to do so will not change, but you will be taxed on your benefits under new simplified rules.

From 20 September 2007 the pension 'assets test' taper rate will be halved to $1.50 per fortnight for every $1,000 of assets above the assets test free area. (This means you may be able to have more in assets and still be entitled to a full or part age pension.)

Reasonable Benefit Limits (RBLs) will be abolished.

You will have greater flexibility as to how and when to draw down your superannuation in retirement. Super funds will no longer be forced to pay benefits.

You will be able to make deductible super contributions up to age 75, but limits apply to how much you can contribute

 

[AJ_]

Hi,

I am 24 years old, and love trading/investing...

Should I do this in a SMSF environment, or should I just stick to doing it under my name (paying income tax etc)

Because obviously there is a long time until IU retire, so I was thinking that there is not much point in a SMSF at this stage as I won't be able to touch any money until i retire.... (unless you can withdraw money from a superfund ?)

But I'm not sure if this is correct thinking and wise money management/tax minimisation....

 

[grumpee boi]

Pension income is tax-free from age 60 onwards. In specie contributions can still trigger a CGT event. You can transfer up to 1 mill up to 30 June and after the changeover 150k pa or roll 3 yrs into 1 with a 450k contribution if under 65.

AJ, young people generally are better off outside the super environment with all the flexibility that access to cash/investments can provide. Having said that, if applicable the government co-contribution is a good way to get bang for buck. 150% return risk free can add up.

Adam

 

[deftfear]

AJ, most accountants (and the ATO as well I think) recommend that you need to have over $200,000 in a smsf before they are worthwhile, as the accounting fees chew up a lot of your profits. If you have a very profitable record in the past, it may be worthwhile to set one up with less cash, but then you also have all the hassle of looking after a smsf which can take time.

 

[yonnie]

hello people,

look at the web site of Nicholas Needham
nicholasneedham.com.au

it says there that from 55 to under 60 you can receive an allocated pension and the portion that is UDC and Pre 1985
is tax free.

I just assumed that UDC is undeducted contributions and I will make a lot of that.

So when I start taking out an allocated pension, my SMSF pays no tax on any profits/CGT and I only pay tax on the part that has been deductable.
You got to withdraw at least 4% of your account per year.

Thats how I understand it, but have a go yourself

 

[yonnie]

hey Julia,

can I take out lump sums tax free under 60?

and what is the accumulation phase of a SMSF exactly?

thanks

 

[Pat]

Pension income is tax-free from age 60 onwards. In specie contributions can still trigger a CGT event. You can transfer up to 1 mill up to 30 June and after the changeover 150k pa or roll 3 yrs into 1 with a 450k contribution if under 65.

AJ, young people generally are better off outside the super environment with all the flexibility that access to cash/investments can provide. Having said that, if applicable the government co-contribution is a good way to get bang for buck. 150% return risk free can add up.

Adam

Adam, You sound just like a FP. LOL! you must have been one or are one?

hey Julia,

can I take out lump sums tax free under 60?

and what is the accumulation phase of a SMSF exactly?

thanks

yonnie, you may not take out "super" monies until you have met a condition of release. ie: reach preservation age and retire, financial hardship etc.
Preservation age is currently 55, so anyone 55 yrs of age and fully retired may access there super.
As it stands, most withdrawals from super are subject to tax, much the same as contributions are. As of July 1st, There is no withdrawal tax for over 60's. WOW! that'll get some votes.

Not sure about SMSF's and the whole tax loop hole thing. Am very interested and would like to learn more.

 

[AJ_]

that sounds pretty good, it's like money for nothing.. however there is one flaw:

if you earn $28,000 - $58,000, then the co-contribution available is:

An amount equal to the lesser of:

personal contribution X 1.5, or
$1,500 - [0.05 X (AI - $28,000)]

so if you earn $50k, the co-contribution is only $400, not the full $1500



---------------------------------

okay, so the consensus seems to be that for my age, a SMSF is not the best way to minimise tax... are there any suggestions ? form a company or a trust ? i'm not very knowledgable on these things, but if there are any ideas, i'd like to check them out.

 

[grumpee boi]

yonnie,
lump sums for those under 60 comprise of 2 components - taxable and non-taxable (exempt). The taxable component can have a tax-free lump sum withdrawal of 140k from 1 July with any excess taxed at 15%. The exempt component (which includes your UDC) is, well, exempt from tax.

If you make large UDCs then yes they will be treated as currently when drawing them out as a pension for those under 60 and over 55. Here are some examples discussing undeducted contributions under the current arrangements. After turning age 60 the pension will simply become tax free as will any lump-sum withdrawals.

Pat,
Yes I am an fp. But I do have a personality - honestly.

adam

 

[explod]

I am 61 years and have had a SMSF set up for 8 years. A third of the fund is in shares which I actively trade on the market myself. I take an allocated pension so have cut out capital gains. It is a wonderful shelter and anyone near to or 60 plus ought to set up thier own fund and put in as much as they can afford before 30 June. I got rid of property to do it and I believe investments in resources will outdo property in the forseeable future anyway. I just recieved a book via the Forums bookshop "The Self Funded Superannuation Fund Handbook" which is invaluable if you are going that way.

cheers to all and happy trading and retirement combined

 

[grumpee boi]

AJ,

Still a 40% return on investment risk free though.

I am doing some work for my brother in law who is slightly younger than yourself. We are starting off with a simple regular investment plan of 5k then 1k per month. When he has some experience and feels confident then we will use instalment gearing to borrow an additional 1k per month. he will then be investing 24k pa.

The flexibility I talk about is the fact that the investment can be liquidated at any time if his needs, wants, etc change. ie gets married, wants to buy a house. Modelling suggests he only needs slightly more than 1k per month until his desired retirement age to achieve the income he desires in retirement. so realistically he should be able to still save a house deposit in the interim without needing to liquidate.

Adam

 

[Pat]

yonnie,
Pat,
Yes I am an fp. But I do have a personality - honestly.

adam

I can tell, It's there... somewhere? LOL!

Actually I speak to alot of planners and there cool...

 

[Wysiwyg]

Hi..a question to all,What is the % rate of tax on smsf capital gains (stocks)?

a)within 12 months
b)outside 12 months

I was told it is 15 % ,regardless of time frame!

 

[Prospector]

I think it is 15% under 12 months and 10% after 12 months?

 

[yonnie]

in my new SMSF I want to have the freedom to trade everything possible, be it cfd`s, futures without borrowing ofcourse.

anybody have investment strategy and risk management strategy documents they wouldn`t mind sharing so that I have an example?

thanks

 

[YELNATS]

I am 61 years and have had a SMSF set up for 8 years. A third of the fund is in shares which I actively trade on the market myself. I take an allocated pension so have cut out capital gains. It is a wonderful shelter and anyone near to or 60 plus ought to set up thier own fund and put in as much as they can afford before 30 June. I got rid of property to do it and I believe investments in resources will outdo property in the forseeable future anyway. I just recieved a book via the Forums bookshop "The Self Funded Superannuation Fund Handbook" which is invaluable if you are going that way.

cheers to all and happy trading and retirement combined

G'day, similar to yourself I have just turned 60 and have had a SMSF for 5 years. After July 1, I am splitting the fund into an allocated pension 90-95% and the remainder 5-10% to stay in super. As I understand it, the beauty is that earnings (capital gains, dividends & interest) are tax free while earned in the pension component. You cannot add any contributions to the pension component, but you can add contributions to the super component, hence that is why you retain this component for this flexibility. Also, you have to withdraw at least 4% of the pension component annually, naturally at zero tax.

Of course, I would like to continue purchase and trade shares etc. within the pension component.

I'm not sure if you can readily and freely transfer further amounts from the super to the pension component at any time in the future.

If I've got any of this wrong, could anyone please correct me.

regards YN.

 

[yonnie]

I`m 57 now, but as I understand it I have to retire and take an allocated pension as soon as the SMSF is set up to stop the SMSF from paying any tax.

Is that right?

Also I can`t be a share trader in my own right anymore
I would assume, because then I`m not retired.

It also means I can`t have ANY income from employment?

thanks

 

[explod]

I`m 57 now, but as I understand it I have to retire and take an allocated pension as soon as the SMSF is set up to stop the SMSF from paying any tax.

Is that right?

Also I can`t be a share trader in my own right anymore
I would assume, because then I`m not retired.

It also means I can`t have ANY income from employment?

thanks

As luck would have it I will be discussing these issues with my advisor tomorrow. I believe as a trustee you may do anything to enhance your super by active proper investment within the meaning of the Act., and that includes as I understand it, actively trading a component within the fund. I beleive that you may take a transitional pension from the fund whilst working and still enjoy the benefits of no capital gains tax on the share trading, there are pro-rata fumulas for this. There has been no warning to me that I cannot trade within the fund as I have been doing for that past four years. Will get back to you after my meeting